Very little black money is ever whitened

Very little black money is ever whitened

Staff Correspondent . Dhaka | Prothom Alo  Jun 16, 2019

Black Money. A Prothom Alo IllustrationThe government once again has proffered the scope to whiten black money. Dishonest taxpayers stand to benefit from this provision, rather than those who pay their taxes honestly. There have hardly been any significant tax cuts to provide the common taxpayers with any degree of relief.

In the past, the National Board of Revenue (NBR) didn’t get much response from the offer to whiten black money, and yet this offer is being made time and again. So the dishonest taxpayers bask in the knowledge that there will always be that chance to legitimise their illegitimate earnings.

The FY2019-20 budget has provided scope to whiten black money by investing in land, flats and the industrial sector. If a certain amount of tax is paid for land and flats, depending on the area, NBR will not question the source of wealth. And investments of black money can be made in economic zones and hi-tech parks with 10 per cent tax payment.

An honest taxpayer saves year after year, pays his taxes regularly and finally purchases a flat or a plot of land. But a dishonest taxpayer simply pays a fixed amount of tax and goes ahead to purchase his flat or land. The money is earned though bribes and corruption down the years and not shown in the books. Then that money is legitimised by purchasing a flat or land.

Again, when it comes to investing in economic zones or hi-tech parks, it is the dishonest tax payer who gets all of the perks, rather than the honest one. An honest taxpayer pays a maximum of 30 per cent in taxes to invest in an economic zone or hi-tech park. Yet the dishonest taxpayer, even after not paying his taxes for years, now gets the chance to invest in these zones or parks with only 10 per cent tax payment. That is not all. The honest and the dishonest taxpayer will both avail the exactly same tax holiday facilities.

Speaking to Prothom Alo, executive director of the anti-corruption watchdog Transparency International Bangladesh, Md Iftekharuzzaman, said, a chance has been given or corruption to flourish and spread. It is unconstitutional to give such scope to whiten black money. The prime minister herself has repeatedly spoken about ‘zero tolerance’ against corruption, but facilitating black money to be whitened is not in keeping with her stance.

Iftekharuzzaman said that there are two matters of concern in the whitening of black money. Those with illegal earnings will swoop down and take over the flats, land and industries. The honest taxpayers will not be able to own these. The corrupt people are being rewarded. And injustice is being displayed towards the honest taxpayers.

Even since independence, almost all governments have given scope to whiten black money. However, only very little black money has actually been whitened. Till date, around Tk 140 billion (Tk 14000 crore) has been whitened. The most black money was whitened in 2007 and 2008 during the rule of the caretaker government. A total of 32,558 persons and companies took advantage of this opportunity at the time. And Tk 96.83 billion (Tk 9683 crore ) was made legit at the time. This is more than half of all the whitened black money till now.

AB Mirza Azizul Islam had been advisor to that caretaker government. He told Prothom Alo, there was no need to give the opportunity to whiten black money this time. This has irked the common people. This scope is not in keeping with Awami League’s election manifesto. And there is no deadline either. Now honest taxpayers will be discouraged from paying their taxes.

Mirza Azizul Islam went on to say that it said that the step to whiten black money is being taken in order to halt capital flight. Rather than providing this facility, it would be better to catch those who have been siphoning off their wealth and to bring them under the law.

Where and how

In FY2013-14 when Abul Maal Abdul Muhith was the finance minister, the chance to whiten black money was given only through the purchase of flats. This time land has been added. And taxes on flat purchase have been lessened too. NBR has no records of how much money has been whitened though these means.
In this budget the provision is that for areas of Gulshan, Banani, Baridhara, Motijheel and Dilkusha, Tk 4000 has to be paid in taxes per square metre for purchase of less than 200 sq metres of flats and commercial buildings and Tk 5000 in taxes to be paid per square metre for flats and buildings over 200 sq metres. And in the case of land purchase, Tk 15,000 has to be paid per sq metre.

In the case of Dhanmondi, DOHS, Mohakhali, Lalmatia, Uttara, Basundhara, Dhaka Cantonment, Karwan Bazar, Bijoynagar, Segun Bagicha, Nikunja, and in Chittagong’s Panchlaish, Khulshi, Agrabad and Nasirabad, less than 200 sq metre purchase of flats and buildings will require Tk 3000 per sq metre in taxes and for over 200 sq metres he taxes will be Tk 5000 per sq metre. And the taxes for land purchase will be Tk 10,000 per sq metre.

Very little black money is whitened

Since the independence of the country, the governments have provided the opportunity to whiten black money 16 times, but hardly any of the black money has actually been whitened.

The first opportunity given to whiten black money was provided in 1975 under military rule. When the president and Chief Martial Law Administrator Ziaur Rahman offered this opportunity in 1977-78, only Tk 700 million (Tk 70 crore) was whitened from which the government gained Tk 100 million (Tk 10 crore) in revenue. In the 1981-82 fiscal, this provision was hardly met with much response.

Under martial law in 1982, Ershad gave the chance to whiten black money with a 15 per cent tax. Under the 1987-88 fiscal budget, only Tk 2 billion (Tk 200 crore) was whitened when the opportunity was given with a 20 per cent tax condition. The government received Tk 400 million (Tk 40 crore) in revenue. In FY 1988-89 a total of Tk 2.50 billion (Tk 250 crore) was whitened with Tk 250 million for the government in revenue. In 1989-90 Tk 4 billion (Tk 400 crore) was whitened and the government gained revenue of Tk 400 million (Tk 40 crore).

No such opportunity to whiten black money was offered when BNP came to power for five years after the fall of Ershad’s autocratic rule.
Coming to power in 1996, almost every year the Awami League government offered various ways and means to whiten black money. In FY 1997-98 it was stared that no questions would be asked if new industrial sector investments were made. And a payment of 7.5 per cent taxes would avail tax holidays. However, no one really took up this offer.

Then the FY 1999-2000 offered a new sort of opportunity in this regard. It was said that the source of wealth would not be questioned if luxury cars and flats were purchased. In FY 2000-01 black money could be whitened by simply paying 10 per cent tax. Only Tk 10 billion (Tk 1000 crore) was whitened. The government got revenue to the tune of Tk 1 billion (Tk 100 crore).

When BNP came to power again in 2001, it gave unconditional chances to whiten black money in various sectors. No taxes were even levied for the purpose. From July 2002 to June 2005, about (Tk 17.75 billion) Tk 1775 crore was whitened and 1077 persons used this provision.

In FY 2005-06, the provision was given to whiten black money with a 7.5 per cent tax payment. And 7252 persons took advantage of this provision. And Tk 46.03 billion (Tk 4603 crore) was whitened then. The government gained Tk 3.45 billion (Tk 345 crore) in revenue at the time.

Awai League again gave all sorts of scope to whiten black money when it came to power in 2009. At the time 1123 persons took this opportunity and whitened about Tk 9.22 billion (Tk 922.99 crore).